Lowest Possible Value for Ending Inventory in a Period of Falling Prices

Inventory Method for Lowest Value

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Question

In a period of falling prices, the inventory method that gives the lowest possible value for ending inventory is

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Explanation

The first-in-first-out (FIFO) method is based on the assumption that the costs of the first items acquired should be assigned to the first items sold, therefore ending inventory on hand is based on the most recent prices.